Franklin Financial Network, Inc. Reports Record Earnings for 2015

FRANKLIN, Tenn., Jan. 26, 2016 /PRNewswire/ -- Franklin Financial Network, Inc., (NYSE: FSB) the parent company (the "Company") of Franklin Synergy Bank (the "Bank"), today reported record consolidated net income of $16.1 million for the year ended December 31, 2015, an increase of 91.1% over $8.4 million for the same period in 2014. Basic earnings per common share for the year ending December 31, 2015 totaled $1.62, a 22.7% increase compared to $1.32 for the same period in 2014.

For the fourth quarter of 2015, consolidated net income was $4.7 million, a 64.5% increase compared to $2.8 million for the fourth quarter of 2014. Basic earnings per common share for the quarter ending December 31, 2015 totaled $0.44, a 22.2% increase compared to $0.36 for the same period in 2014. Basic earnings per common share were down slightly compared to $0.49 for third quarter of 2015, which included $1.2 million of pre-tax income related to the payoff of a purchased credit-impaired loan relationship.

On a fully diluted basis, earnings per share were $0.41 for the quarter ended December 31, 2015, compared to $0.34 for the quarter ended December 31, 2014, an increase of 20.6%. For the year ended December 31, 2015, fully diluted earnings per share were $1.54, an increase of 21.3%, compared to $1.27 for the year ended December 31, 2014. 

"The year 2015 was the most profitable year in the history of our bank, with earnings that nearly doubled 2014 earnings, and we posted our twenty-eighth consecutive profitable quarter," explained Richard Herrington, Chairman and Chief Executive Officer. "Organic loan growth continues to exceed expectations. Our annual growth rate in loans, including loans held for sale, is more than 63% since December 31, 2014; at the same time, we continued to diversify our loan portfolio, while maintaining a strict focus on asset quality."

"Compared to the third quarter of 2015, earnings were down slightly in the fourth quarter due to the $1.2 million of pre-tax income related to the purchased credit impaired loan payoff in the third quarter. In addition, we made investments in our profitability and growth during the fourth quarter, including expenditures related to our pending acquisition of Civic Bank & Trust and related to our risk management initiatives."

Selected highlights for the fourth quarter of 2015:

• On December 14, 2015, the Company announced an agreement to acquire Civic Bank & Trust, based in Nashville, TN.
• The Company announced the addition of an office in Nolensville, TN. The office opened on January 14, 2016.
• The Company's loans grew $179.4 million during the fourth quarter, and the healthcare lending team produced $53.9 million, or 30.0%, of that growth, helping to further diversify the Company's loan portfolio.
• Fourth quarter performance illustrates the importance of asset quality in tandem with an organically growing bank. Nonperforming assets as a percentage of total assets were 0.2% at December 31, 2015.

Full Year 2015 Results of Franklin Financial Network, Inc.

Balance Sheet Growth and Asset Quality

• At December 31, 2015, assets totaled $2.2 billion, compared to $1.4 billion at December 31, 2014, an increase of 59.9%.
• The strength of the local market as well as continued loan demand fueled the Company's loan growth. Total loans, including loans held for sale, totaled $1.3 billion at December 31, 2015, an increase of $512.3 million, or 63.6%, when compared with $805.7 million at December 31, 2014.
• The majority of the loan growth was in three categories: business lending, residential construction lending and commercial real estate lending, which grew $207.5 million, $76.7 million and $174.4 million, respectively.
• The growth in business loans served to diversify the Company's total loan portfolio with real estate lending concentration decreasing to 77.6% at December 31, 2015 from 89.1% at December 31, 2014.
• Nonperforming assets as a percent of total assets were 0.2% at December 31, 2015 and 0.1% at December 31, 2014, significantly below industry averages. Nonperforming assets increased $1.6 million to $3.5 million from the December 31, 2014 total of approximately $1.9 million, primarily due to one lending relationship.
• Investment securities grew $285.0 million, or 63.5%, during 2015, to $734.0 million. This growth is attributable to the leverage program of purchasing securities during the second and third quarters of 2015 to properly utilize the capital that was raised in the IPO during the first quarter of 2015.
• Deposits grew to $1.8 billion at December 31, 2015 versus $1.2 billion at December 31, 2014, a growth rate of 54.8%. Year-to-date cost of interest-bearing deposits was down marginally at 0.66% at December 31, 2015, compared to 0.67% at December 31, 2014.

Profitability

• The primary driver of increased net interest income was continued growth in earning assets (loans and investment securities). Net interest income increased 57.6% to $59.4 million for the year ended December 31, 2015, up from $37.7 million for the same period in 2014.
  • During the third quarter of 2015, the Company received a full payoff of a purchased credit-impaired loan relationship, which increased the Company's net interest income and pre-tax earnings by nearly $1.2 million.
• The net interest margin for the year ended December 31, 2015 was 3.59%, a decline from 3.74% at year ended December 31, 2014, due to the growth in investment securities.
• Noninterest income for the year ended December 31, 2015, was $12.9 million, compared to $10.0 million for the year ended December 31, 2014, an increase of 29.1%. Increased mortgage loan volume and improved margins on mortgage banking accounted for $1.0 million of the increase in noninterest income when comparing the years ended December 31, 2015 and 2014. The increase in noninterest income can also be traced to fees generated by increased wealth management services.
• Noninterest expense for the year ended December 31, 2015 was $42.1 million, a 32.8% increase over 2014 noninterest expense of $31.7 million.

Primary drivers of the increase in noninterest expense for the year ended December 31, 2015 compared with the same period in 2014 include:

• Increased operating expense associated with the Company's acquisition of MidSouth Bank in July of 2014 and with the overall growth of the Company.
• Increased professional fees related to the Company's pending acquisition of Civic Bank & Trust, the Company's risk management initiatives, and other potential initiatives that the Company is currently assessing.
• Expenses associated with operating as a public company.
• The addition of a healthcare banking team during the second quarter of 2015.
• Significant growth in both loans and deposits has allowed the Company to achieve operating economies of scale. The Company's efficiency ratio for the year ended December 31, 2015, adjusted for the $1.2 million earned from the payoff of a large purchased credit-impaired loan during the third quarter, was 59.3% at December 31, 2015, as compared to 66.6% at December 31, 2014.
• Provision expense for the year ended December 31, 2015, was $5.0 million versus $2.4 million for 2014. The Company's significant loan growth drove the increase in provision for loan losses from 2014 to 2015.

"In just over eight years, by executing our banking model, we have capitalized on growth opportunities within our markets while maintaining top asset quality," stated Herrington. "At the end of 2015, we are ahead of where we thought we would be at this point. As we move into our ninth year of operation, we plan to continue to execute the banking model we believe will lead to greater success."

Webcast and Conference Call Information
Franklin Financial Network, Inc. will host a webcast and conference call at 9:00 a.m. (CST) on January 27, 2015 to discuss year-end 2015 results. To access the call for audio only, please call 1-844-378-6480. For the presentation and streaming audio, please access the webcast on the Investor Relations page of Franklin Synergy Bank's website at www.franklinsynergybank.com.

For those unable to participate in the webcast, it will be archived on the Investor Relations page of Franklin Synergy Bank's website at www.franklinsynergybank.com for one year, with audio available for 90 days.  

Safe Harbor for Forward-Looking Statements

This media release contains forward-looking statements.  Such statements include, but are not limited to, projected sales, gross margin and net income figures, the availability of capital resources, and plans concerning products and market acceptance.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein.

Future operating results of the corporation are impossible to predict, and no representation or warranty of any kind can be made respecting the present or future accuracy of such forward-looking statements or the ability of the corporation to meet its obligations, and no such representation or warranty is to be inferred.

Franklin Financial Network, Inc.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Some of the financial data included in our selected historical consolidated financial information are not measures of financial performance recognized by GAAP. Our management uses these non-GAAP financial measures in its analysis of our performance:

• "Common shareholders' equity" is defined as total shareholders' equity at end of period less the liquidation preference value of the preferred stock;
• "Tangible common shareholders' equity" is common shareholders' equity less goodwill and other intangible assets;
• "Total tangible assets" is defined as total assets less goodwill and other intangible assets;
• "Other intangible assets" is defined as the sum of core deposit intangible and SBA servicing rights;
• "Tangible book value per share" is defined as tangible common shareholders' equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets;
• "Tangible common shareholders' equity ratio" is defined as the ratio of tangible common shareholders' equity divided by total tangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period-to period in common equity and total assets, each exclusive of changes in intangible assets;
• "Return on Average Tangible Common Equity" is defined as net income available to common shareholders divided by average tangible common shareholders' equity;
• "Efficiency ratio" is defined as noninterest expenses divided by our operating revenue, which is equal to net interest income plus noninterest income;
• "Adjusted yield on loans" is our yield on loans after excluding loan accretion from our acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on our yield on loans, as the effect of loan discount accretion is expected to decrease as the acquired loans mature or roll off of our balance sheet;
• "Net interest margin" is defined as annualized net interest income divided by average interest-earning assets for the period;
• "Adjusted net interest margin" is net interest margin after excluding loan accretion from the acquired loan portfolio and premiums for acquired time deposits. Our management uses this metric to better assess the impact of purchase accounting on net interest margin, as the effect of loan discount accretion and accretion of net discounts and premiums related to deposits is expected to decrease as the acquired loans and deposits mature or roll off of our balance sheet.

We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:

Contact: Aimee Punessen, (615) 236-8329
[email protected]

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SOURCE Franklin Financial Network, Inc.

Related Links

http://www.franklinsynergybank.com